Drillisch targets top of German telecoms market after 1&1 deal

FRANKFURT: German budget mobile operator Drillisch will target the top of the market after its 8 billion-euro ($8.9 billion) merger with United Internet's 1&1 brand, its chief executive said, posing a new challenge to the premium brands.

Deutsche Telekom, Vodafone and Telefonica Deutschland have faced little threat until now from Drillisch, which appeals to customers on a tight budget and is known for its corny television ads featuring local celebrities.

"The perception that Drillisch stands for cheap deals will change," Vlasios Choulidis told Reuters in an interview. "We will be at the same level with the three big operators."

The new Drillisch had been expected by analysts to be a greater threat to the more price-sensitive products offered by the three network operators, leaving the top end of the market relatively undisturbed.

Bernstein analyst Dhananjay Mirchandani wrote when the deal was announced it should create "further structural repair with longer-term benefits," for the German mobile market, "but heightened competitive intensity in the near term" in the more price-conscious segment.

Telefonica Deutschland said last month it did not expect that the deal would impact its strategy.

Drillisch is in the process of a staggered stock-and-cash deal with United Internet that will create a business valued at 8 billion euros with mobile and fixed telecom products under one roof and more than 12 million customers.

That will make it a competitive fourth player in the German telecoms market, helped by United Internet's strong 1&1 brand and fibre network - Germany's second-largest - as well as having no need to invest in a mobile network.

Drillisch secured access to Telefonica Deutschland's mobile network three years ago as part of regulatory remedies to clear Telefonica's 8.6 billion-euro acquisition of KPN's E-Plus.

"We will continue to be able to offer the best value for money, but at higher prices we will also be able to offer more. Our products will be better and prices will rise accordingly," Choulidis said.

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